Big Jim's correct! The most common Zirconia O2 sensor acts as a battery of sorts, it creates a low voltage based on the difference between the amount of the oxygen in the exhaust vs. the amount in the atmoshpere. More O2 in the exhaust, less voltage will be produced. Less oxygen, more voltage will be produced. Lean running or a misfire results in more O2 in the exhaust. Rich running results in less O2.

As Jim stated, the PCM reads the voltage signal from the O2 and it reacts by adjusting the pulsewidth to compensate.

The designers could make the system adjust to a steady 14.7 air/fuel point, but they choses to vary the pulse slightly richer then leaner than needed to allow more fuel then more O2 into the cat converter to boost it's efficiency. This is the O2 sensor "Switching point" This "Cat food" alows the cat-converter to maintain the required temperatures (the fuel part) and gives the cat added O2 (the oxygen part) to allow the catalysing action to occur.